The monthly survey of funds by Bank of America Merrill Lynch has picked up a sudden crumbling of confidence in the eurozone core, with France viewed as the country most likely to deliver a nasty surprise later this year. Europe’s debt crisis is by far the biggest worry worldwide, with the US “fiscal cliff” and China’s property slide well behind.

A net 32 of money managers expect trouble in Germany, a dramatic reversal since May. The worries may be linked to the Bundesbank’s rocketing claims on eurozone central banks under the ECB’s “Target2” payment system, now €729bn (£572m). These reflect the scale of capital flight from the Club Med bloc, and may prove hard to collect if the euro blows apart.

A net 55pc expect a bad surprise from France, which has $710bn (£456bn) of bank exposure to Club Med. President François Hollande is courting fate by raising the minimum wage, employing 60,000 new teachers and clinging to a largely unreformed state that takes 56pc of GDP.

While investors seem willing to overlook the leisurely pace of fiscal tightening, they may be less forgiving of Mr Hollande’s nonchalance over France’s relentless loss of global competitiveness.

The growing doubts about Germany and France have not yet surfaced in the debt markets. Short-term borrowing costs have turned negative in both countries. The immediate flight to safety has overwhelmed all other effects.

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Germany has until now been able to head off any threat to its own credit rating, agreeing to loan packages at penal rates for Greece, Ireland and Portugal without crossing the Rubicon to pan-EMU debt-pooling. The escalating crisis in Spain and Italy changes the nature of the crisis entirely. The world is now intervening.

Chancellor Angela Merkel came under intense pressure in late June from the US and China, as well as a united Latin bloc, to permit the direct recapitalisation of Spain’s crippled banks by Europe’s bail-out fund (ESM). It marks the start of debt mutualisation, leaving Germany on the hook. Mrs Merkel had no mandate from the Bundestag to make such a concession and has been rowing back ever since.

Social-Democrat spokesman Carsten Schneider warned the government not to “play games” with parliament, saying a direct ESM bail-out of Spain’s banks “violates the law.”

A document submitted to the Bundestag on Tuesday states that the €100bn package is a loan to the Spanish state. “The uncertainty is put to rest: Spain alone is responsible,” said Michael Meister, the Christian Democrat leader in the Bundestag.

Spain faces the worst of all worlds. The EU has imposed a highly-intrusive Greek-style “Memorandum” on the country, forcing drastic cuts as the country slides deeper into slump. This is leading to bitter street protests, with even police joining marches in Madrid on Tuesday.

Yet the promised bank recapitalistion is hostage to German politics. The rescue will be a sovereign loan for the foreseeable future, pushing public debt to 90.3pc of GDP this year.

Spain was able to raise 12-month funds at 3.9pc on Tuesday, down from over 5pc last month, despite warnings by the International Monetary Fund that the economy will contract again next year with no stabilisation of public debt in sight. The real test will come in October when the Spanish Treasury must raise €20bn.

For hedge funds lining up to “short” German bonds, it scarcely matters whether Germany opts to save the eurozone by sharing – or inflating away – the debts of Italy and Spain or whether it stands firm and lets the system fall apart. Either outcome entails huge losses for the country. On that basis the German 10-year Bund is on borrowed time as a safe-haven asset.